CBO has too narrow a focus on health care

On the CBO's front page and all the headlines are about reducing the deficit. The talk about the health care law is only focused on how it will reduce the federal deficit, not how it will effect the actual amount Americans spend on health care. Here is the thing, like most reasonable people, if someone said that I can either see the cost of my health care go up by $1000 in my private spending or see my taxes go up by $500 I would rather see my taxes go up by $500 because I am better off. This perception people have which overemphasizes small increases in government spending while ignoring massive costs at the rest of our pocket books is going to ruin our nation, and I am not exaggerating, this has been the result of many well designed studies. We need to see a dollar as a dollar no matter where it enters or leaves our pocket books, to do otherwise is folly.

The CBO leaves out the big issue in this report which is overall health care spending for the country. Read it here: https://www.cbo.gov/publication/52486 even though they leave out the most important part of any health care legislation in this country.

CBO budget analysis, Appendix B, Affordable Care Act

I was reading a report today from the Congressional Budget Office which talked about the impacts of Obamacare after reading about how the Republicans cheered for a part in it on how it will supposedly "kill jobs", and I found the following interesting:

• The ACA's coverage provisions in 2014 will cost the Federal government $41 billion. While this seems like a lot, it is only $132.25 per capita, which can be as much as a family of four will spend on groceries in a week. This is one point I always make to people when it comes to government spending. The US is huge, and numbers in the millions, billions, and trillions seem really large. If we calculate the per capita cost by dividing those numbers by 310 million we get a number we can understand on how much it costs per individual which makes them seem more relevant.
• The Congressional Budget Office argues that because people are going to see slightly higher taxes. While I understand this logic, and that if you increase the cost of doing something less people will do it, I'm not sure if labor is flexible enough for it to happen. The reason I doubt this is first of all, economists know wages are sticky. Most prices will fluctuate given supply and demand more or less freely, as consumers know when they see the prices of different fruit or gasoline go up and down over time as the market shifts. Despite the changes in the market, wages don't go up and down nearly as much as other goods because they are sticky. Employees see this stickiness firsthand because they have their wages stay the same for an extended period of time through a contract between their employer and either themselves or their union. Even if the market fluctuates and unemployment goes up and down wages will stay more or less constant in nominal terms over the medium-term. On top of this, it is always better to work than not to work which is why we see people look for higher pay because even if it is taxed at a higher rate you are still better off. When they increase the taxes on employment by the very small tax the ACA added (about 1%) and required full-time employees to have health insurance employees are still better off working than not working, so I don't expect workers to significantly change their habits. Similarly for employers, even if employees are each being taxed at a low rate they are better off hiring employees to cover demand than have insufficient employees to cover the demand for their product opening up a door for a competitor to come into the industry and steal business. We observe wages work more like gasoline than apples, because if the price of apples goes up you can purchase oranges, but if the price of gasoline goes up and you have to travel you are better off paying more to go to work than not going to work everyday, and wages work the same way. That is why I am skeptical about seeing a significant change in employment with the new ACA taxes.

Source:
https://www.cbo.gov/sites/default/files/cbofiles/attachments/45010-Outlook2014.pdf
http://www.washingtonpost.com/blogs/plum-line/wp/2014/02/04/what-the-cbo-report-on-obamacare-really-found/

One reason I like Obamacare

I received a notification from my employer today about that they were going to send me a notification saying they were going to give me information about the new health insurance exchange being set up as part of Obamacare. I am currently under 26 and going to college so I am required to have the option to continue under my parent's insurance as long as I am going to school. However, for adults who get insurance from their employer this is good because if my employer moves the money it spends on my insurance to income and I am allowed to buy my own I can have more money by finding a better deal and have more expendable income. The wages are also tax-deductable for the company, so it makes no change in expenses and deductions for taxes. The employer has no change and the employee gets a pay raise after the expense of the new insurance plan.

The next 2 years,

Independence Day is a good day to look backwards at our accomplishments (emancipation, universal suffrage, civil rights, etc.) and look at what our country must do in the future. So that is my theme for today.

The United States currently has a large number of daunting problems/challenges, and a number of great opportunities:

1. Partisan gridlock and yellow journalism (the largest of whom are MSNBC and FOX) is tearing our nation apart. With such polarization it puts a lot of pressure on our leaders to lead extremely well to make it impossible for these pundits make them look bad or good depending on their point of view. Obamacare is a perfect example of how such biased reporting can skew people's opinions, as Kaiser points out where the majority of Americans don't know what Obamacare actually does. That the majority of Americans don't know what a major law does shows a clear failure in our country's media. Obama clearly needs to work on his PR.
2. Our two parties are at once closer than they should be and more distant than they have been in a long time. Everything the Democrats propose, even if it is taken practically word for word from a previous Republican proposal (like Obamacare and the Republican counterproposal in 1993) will be blocked from the Republicans. Most Americans when they turn on cable news get very biased and incomplete information about what is actually being proposed on the hill, and this furthers the partisan split as the Fox News watchers go one direction and the NBC folks go another. Very few people find the balanced center where you get the facts without the spin. This helps move our parties further and further apart in social issues with very little center in the middle, but on some issues like our constitutional freedoms (like the right to an attorney) neither the left nor right wing media is willing to tell the full truth and the parties further split on some core issues (like health care, whether there actually were weapons in Iraq, distribution of wealth and income, access to education, among others) and the coverage on some issues the media is so completely monotonous and frequently incorrect that there is little knowledge or debate about some pressing issues (like what should be done in Europe with the economy, Israel, North Korea, China, mass transit, among other issues). This force drives our two parties further to one side as they continue to get money from a select group of people that drive our policy. American policy is so much more diverse and there is so much more information about these issues than the media tells us, which eventually will be so clearly incorrect that a lot of Americans are going to be very disillusioned as the media grows further from reality.
3. We will need more parties and a new election system to represent the splitting of Democrats ("Old Democrats" and "New Democrats") and Republicans (Libertarians and Christian fundamentalists) which have such large differences between them that will make the parties unstable. If we don't I fear we will eventually have a situation like Canada in 2011 which will be devastating to the victors once the parties split. Changing our voting system will also help bridge the partisan divide because everyone can agree with the Libertarians on something, creating a bridge in congress between the two sides. It will allow more views to be represented in Congress that will be a more accurate picture of Americans' beliefs.
4. Our health care costs will continue to rise (though not as quickly as they have been) with Obamacare in place because it doesn't go far enough and it will need to be expanded upon and reevaluated.
5. Many students coming out of our education system today will be so unprepared to be in the world compared to their international peers because of the way the government finances and runs education which means it will need to be reevaluated. If we don't we will be beaten economically and our economy will suffer from the lack of knowledge our students will have.
6. We will need to reform our tax code so tax capital gains as regular income (like Australia) which will balance the budget and encourage investors to invest for the long-term so companies can use the money they give them, and give tax breaks to struggling American families to raise the demand curve. We will need to increase the incentives of businesses to hire people through taxes. If we don't our economy will remain unstable. This will also balance the budget. If we changed it we could become a very stable economy and surpass all other nations in economic growth.
7. Immigration reform will finish going through which will probably be more work visas for farm workers.

Happy Independence Day, let's make this country greater!